Tuesday's market close saw the NASDAQ Composite Index hit its lowest close of the year 2000 with the same sort of lacklustre activity of the last couple of weeks.

Lacklustre meaning 850 million shares changed hands instead of one and a half to two billion shares. Those heady euphoric days when it appeared that we all made money on paper and some of us actually took the profits to the bank, are a memory for now.

Quality utility, pharmaceutical and cheaper stocks with good dividends were still sought after.

There was little momentum in technical stocks except for those with superb fundamentals and the mock portfolio certainly reflects the continued selloff with a sea of red ink. Sitting on the sidelines Investors large and small hope that the bottom is near, that the signs from the United States Federal Reserve indicate the economy is slowing, then they will re-evaluate and strategise their portfolios. Many fund managers say they are sitting on the sidelines and cutting trading to a minimum until the market stabilises. One portfolio manager quoted in thestreet.com joked he was just hiding under his desk, sucking his thumb.

While sounding a bit trite, it is not an unusual statement, since no clear direction is evident.

As was mentioned over the last several weeks, even some investor greats are hanging up their puts and calls, bowing to the unpredictability of a global market that can be merciless to those making the wrong moves, and richly rewarding to those who don't, albeit unwittingly in some instances.

Stockbrokers based in New York will soon vacation in the Hamptons (those that can still afford it and have a job). They will sit and play in the sand hoping for better market conditions toward the end of the year, so they can afford to summer fashionably again next year.

Economic signs How will we know when the latest rate hike of last week will filter out? As the money supply tightens through higher interest rates, corporate borrowing becomes more expensive, so companies invest less; some capital expansion gets put off, new workers don't get hired; credit card, mortgage and commercial loans go up, so consumers start economising on items they can control.

They may opt for fixed mortgages (FRMs) instead of adjustable rate mortgages (ARMs); those that have adjustables may lock in or cap the rate ascension level. New homebuyers may find that they no longer qualify for a mortgage under the higher interest rate ceilings.

Buying a home means postponing all the interior items, appliances, furniture, carpeting etc. Cheaper vacations may be taken closer to home, rather than the exotic trip always dreamed of.

What about GDP? As reported Thursday, GDP is still above expectations. The US economy grew at its fastest pace in 10 years in the first quarter, though retail spending dropped noticeably. Overall though, the economy is still strong and the Fed will have to consider raising rates again, but perhaps not until the end of the August.

Certainly, these results are disappointing, but the Fed must continue to try to even out the inflationary effect of the economy so that it can grow at a more sustainable pace.

While many investors have indicated that they have no additional capital to place in the market at this time, the inflow of cash in the first quarter to stock funds was the highest ever.

This, too, is an indication that some investors still have extra capital to place, but are also biding their time.

Much of this excess can be attributed to the record high amounts and numbers of income tax refunds.

When this money (now waiting on the sidelines) is finally placed, there will be a tremendous upward bounce. Who knows when that will be? Positive News Increase in interest rates means increases in money market funds and higher rates of return on new issues of bonds and ultrashort term bond funds.

Interest rate swings should not adversely affect those with a long-term asset allocation strategy. The best plan of action during market turbulence is to review your long-term objectives to be sure that you are properly diversified with fixed income, foreign stock exposure, balanced group or domestic stocks and cash reserves.

Next week will talk about bonds and the ultrashort term bond product whose rates correlate with interest rates.

Under no circumstances does the information in this column represent a recommendation to buy or sell stocks or any other investments. Readers needing specific assistance should seek professional advice from their financial advisor. Martha Myron CPA CA is a Bermudian, holds a Series 7 NASD license and is a United States federally authorised tax practitioner. She is Programming Chair for the International Association for Financial Planning / Bermuda.

Questions regarding this article may be sent to her at 234-0290 or Email: marthamyron y northrock.bm Tumbling: A stockbroker reacts in the Nasdaq 100 pit on Monday after another roller-coaster day in the stock market. At its low point, the Nasdaq was at 3,172.65, a level not seen since last fall when the index began it record-breaking ascent.